Interactive Intelligence Reports First-Quarter 2013 Financial Results

  Interactive Intelligence Reports First-Quarter 2013 Financial Results

  *Total orders up 31 percent from 2012 first quarter.
  *Cloud-based orders increased 42 percent to 31 percent of total orders.
  *Total revenues up 39 percent to $73.2 million.

Business Wire

INDIANAPOLIS -- May 6, 2013

Interactive Intelligence Group Inc. (Nasdaq: ININ), a global provider of
unified IP business communications software and services, has announced
financial results for the first quarter ended March 31, 2013.

“During the first quarter of 2013, we had solid order growth in all our
geographies and booked twice as many orders greater than $250,000 as we did in
the first quarter last year,” said Interactive Intelligence founder and CEO,
Dr. Donald Brown. “Our year-over-year revenue growth further highlights our
ongoing traction with some of the world’s largest global companies as they
adopt our technology with on-premises deployments or by joining the move to
the cloud. The rapid growth of our cloud-based orders and revenues continued
to enhance the scale of our overall recurring revenues. We will continue to
make those investments that drive growth in market share, particularly with
our cloud-based offering, which remains the highest growth segment of our
market.”

Brown added: “We remain committed to innovation and extending our product
capabilities, as evidenced by the recent launch of our cloud-based product for
small contact centers. Looking forward, we are confident in our long-term
strategy to expand our cloud business, thereby increasing our recurring
revenues and consistently gaining market share.Based on our strong global
pipeline, we are maintaining our 2013 total order growth forecast of 20
percent, with cloud-based orders expected to represent approximately half of
total orders.”

First-Quarter 2013 Financial Highlights:

  *Orders: Total orders increased by 31 percent from the first quarter of
    2012, while cloud-based orders were up 42 percent over the first quarter
    of 2012 and comprised 31 percent of total orders. The company signed 39
    contracts over $250,000, which included eight orders over $1 million, up
    from 17 orders over $250,000, including six orders over $1 million in the
    first quarter of 2012.
  *Revenues: Total revenues were $73.2 million, an increase of 39 percent
    over the first quarter of 2012. Recurring revenues, which include both
    maintenance and support from perpetual license agreements and cloud-based
    revenues, increased 22 percent to $33.8 million and accounted for 46
    percent of total revenues. Cloud-based revenues increased 42 percent to
    $7.1 million. Product revenues were $28.0 million and services revenues
    were $11.4 million, up 44 percent and 101 percent, respectively, compared
    to the first quarter of 2012. During the first quarter of 2013, product
    revenues benefited from partial revenue recognition of a large order
    signed during the fourth quarter of 2012.
  *Total Deferred Revenues: Deferred revenues increased to $110.2 million as
    of March 31, 2013, from $77.8 million as of March 31, 2012. In addition,
    the amount of unbilled future cloud-based revenues as of March 31, 2013
    increased to $95.8 million from $40.6 million at the end of the 2012 first
    quarter. The combination of deferred revenues and unbilled future
    cloud-based revenues was $206.0 million, up 74 percent from $118.4 million
    as of March 31, 2012.
  *Operating Income: GAAP operating income was $3.4 million for the first
    quarter of 2013, compared to $276,000 in same quarter last year. Non-GAAP*
    operating income was $6.2 million for the first quarter of 2013, with a
    non-GAAP operating margin of 8.5 percent, compared to $2.4 million and 4.6
    percent, respectively, in the first quarter of 2012.
  *Net Income: GAAP net income for the first quarter of 2013 was $1.5
    million, or $0.07 per diluted share based on 20.7 million weighted average
    diluted shares outstanding, and included a tax credit related to 2012
    research and development of $600,000. These results compare to GAAP net
    income for the same quarter in 2012 of $189,000, or $0.01 per diluted
    share based on 20.0 million weighted average diluted shares outstanding.

    Non-GAAP net income for the first quarter of 2013 was $3.6 million, or
    $0.17 per diluted share, compared to non-GAAP net income of $1.9 million,
    or $0.09 per diluted share for the same quarter in 2012.

  *Cash, Cash Equivalents, and Investments: As of March 31, 2013, we had
    cash, cash equivalents, and investments of $81.9 million.
  *Cash Flows: The company used $1.0 million in cash flow for operating
    activities in the first quarter of 2013 and $3.6 million for capital
    expenditures, which included expansion of its cloud infrastructure, and
    received $5.7 million from the exercise of stock options.

* A reconciliation of GAAP to non-GAAP financial measures has been provided in
the financial statement tables included with this press release. An
explanation of these measures is also included below under the heading
“Non-GAAP Measures.”

Additional First-Quarter 2013 and Recent Highlights:

  *Interactive Intelligence launched CaaS Small Center℠, a new cloud solution
    designed to give contact centers with under 50 agents a simple,
    cost-effective way to access the same sophisticated communications
    applications as the largest global centers.
  *Interactive Intelligence released an enhanced version of its Bay Bridge
    Decisions^™ contact center forecasting, capacity planning and analysis
    product suite, which was designed to help customers reduce costs and
    improve service.
  *Interactive Intelligence purchased the customer support agreements of
    Amtel Communications Ltd., its New Zealand-based reseller, effective April
    1, 2013.

Interactive Intelligence will host a conference call today at 4:30 p.m.
Eastern time (EDT) featuring Dr. Brown and the company's CFO, Stephen R. Head.
A live Q&A session will follow opening remarks.

To access the teleconference, please dial 1 877.324.1969 at least five minutes
prior to the start of the call. Ask for the teleconference by the following
name: “Interactive Intelligence first-quarter earnings call.” The
teleconference will also be broadcast live on the company's investor
relations' page at http://investors.inin.com. An archive of the teleconference
will be posted following the call.

About Interactive Intelligence

Interactive Intelligence Group Inc. (Nasdaq: ININ) is a global provider of
contact center, unified communications, and business process automation
software and services. The company's unified IP business communications
solutions, which can be deployed on-premises or via the cloud, are ideal for
industries such as financial services, insurance, outsourcers, collections,
and utilities. Interactive Intelligence was founded in 1994 and has more than
5,000 customers worldwide. The company is among Forbes Magazine's 2011 Best
Small Companies in America and Software Magazine's 2012 Top 500 Global
Software and Service Providers. It employs approximately 1,400 people and is
headquartered in Indianapolis, Indiana. The company has offices throughout
North America, Latin America, Europe, Middle East, Africa and Asia Pacific.
Interactive Intelligence can be reached at +1 317.872.3000 or info@inin.com;
on the Net: www.inin.com.

Non-GAAP Measures

The non-GAAP measures shown in this release include revenue which was not
recognized on a GAAP basis due to purchase accounting adjustments and exclude
non-cash stock-based compensation expense, the amortization of certain
intangible assets related to acquisitions by the company and non-GAAP income
tax expense. Reconciliations of these non-GAAP measures to the most directly
comparable GAAP measures are included with the financial information included
in this press release. These measures are not in accordance with, or an
alternative for, GAAP and may be different from non-GAAP measures used by
other companies. Stock-based compensation expense and amortization of
intangibles related to acquisitions are non-cash and non-GAAP income tax
expense is pro forma based on non-GAAP earnings. Management believes that the
presentation of non-GAAP results, when shown in conjunction with corresponding
GAAP measures, provides useful information to management and investors
regarding financial and business trends related to the company's results of
operations. Further, management believes that these non-GAAP measures improve
management's and investors' ability to compare the company's financial
performance with other companies in the technology industry. Because
stock-based compensation expense, non-GAAP income tax expense amounts and
amortization of intangibles related to acquisitions can vary significantly
between companies, it is useful to compare results excluding these amounts.
Management also uses financial statements that exclude stock-based
compensation expense, non-GAAP income tax amounts and amortization of
intangibles related to acquisitions for its internal budgets.

Forward Looking Statements

This release may contain certain forward-looking statements that involve a
number of risks and uncertainties. Among the factors that could cause actual
results to differ materially are the following: rapid technological changes in
the industry; the company's ability to maintain profitability; to manage
successfully its growth; to manage successfully its increasingly complex
third-party relationships resulting from the software and hardware components
being licensed or sold with its solutions; to maintain successful
relationships with certain suppliers which may be impacted by the competition
in the technology industry; to maintain successful relationships with its
current and any new partners; to maintain and improve its current products; to
develop new products; to protect its proprietary rights adequately; to
successfully integrate acquired businesses; and other factors described in the
company's SEC filings, including the company's latest annual report on Form
10-K.

Interactive Intelligence is the owner of the marks INTERACTIVE INTELLIGENCE,
its associated LOGO and numerous other marks. All other trademarks mentioned
in this document are the property of their respective owners.

Interactive Intelligence Group, Inc.
Condensed Consolidated Statements of Operations and Comprehensive Income
(in thousands, except per share amounts)
(unaudited)
                                                               
                                                                    
                                                       Three Months Ended
                                                       March 31,
                                                       2013         2012
                                                                    
Revenues:
  Product                                              $ 27,991     $ 19,435
  Recurring                                              33,827       27,639
  Services                                              11,420     5,694  
                 Total revenues                         73,238     52,768 
Costs of revenues:
  Product                                                7,878        5,652
  Recurring                                              10,142       7,240
  Services                                               7,861        4,233
  Amortization of intangible assets                     49         35     
                 Total cost of revenues                 25,930     17,160 
Gross profit                                            47,308     35,608 
Operating expenses:
  Sales and marketing                                    23,292       17,763
  Research and development                               12,524       10,380
  General and administrative                             7,614        6,888
  Amortization of intangible assets                     463        301    
                 Total operating expenses               43,893     35,332 
Operating income                                         3,415        276
Other expense:
  Interest income, net                                   199          182
  Other expense                                         (1,402 )    (184   )
Total other expense                                     (1,203 )    (2     )
Income before income taxes                               2,212        274
Income tax expense                                      755        85     
Net income                                             $ 1,457     $ 189    
Other comprehensive income:
  Foreign currency translation adjustment              $ 105        $ 381
  Net unrealized investment gain (loss) - net of tax    (32    )    160    
Comprehensive income                                   $ 1,530     $ 730    
                                                                    
                                                                    
Net income per share:
Basic                                                  $ 0.07       $ 0.01
Diluted                                                  0.07         0.01
                                                                    
Shares used to compute net income per share:
Basic                                                    19,704       19,099
Diluted                                                  20,738       20,020
                                                                             

Interactive Intelligence Group, Inc.
Reconciliation of Supplemental Financial Information
(in thousands, except per share amounts)
(unaudited)
                                                      
                                             Three Months Ended
                                             March 31,
                                             2013         2012
                                                          
Recurring revenue, as reported               $ 33,827     $ 27,639
Purchase accounting adjustments               85         130    
Non-GAAP recurring revenue                   $ 33,912    $ 27,769 
                                                          
Recurring revenue gross profit as reported   $ 23,685     $ 20,399
Purchase accounting adjustments                85           130
Non-cash stock-based compensation expense     166        122    
Non-GAAP recurring revenue gross profit      $ 23,936    $ 20,651 
Non-GAAP recurring revenue gross margin        70.6   %     74.4   %
                                                          
Services revenue gross profit as reported    $ 3,559      $ 1,461
Non-cash stock-based compensation expense     48         34     
Non-GAAP services revenue gross profit       $ 3,607     $ 1,495  
Non-GAAP services revenue gross margin         31.6   %     26.3   %
                                                          
Total revenue, as reported                   $ 73,238     $ 52,768
Purchase accounting adjustments               85         130    
Non-GAAP total revenue                       $ 73,323    $ 52,898 
                                                          
Gross Profit, as reported                    $ 47,308     $ 35,608
Purchase accounting adjustments                85           130
Operating expenses                             49           35
Non-cash stock-based compensation expense     214        156    
Non-GAAP gross profit                        $ 47,656    $ 35,929 
Non-GAAP gross margin                          65.0   %     67.9   %
                                                          
Operating income, as reported                $ 3,415      $ 276
Purchase accounting adjustments                611          588
Non-cash stock-based compensation expense     2,170      1,579  
Non-GAAP operating income                    $ 6,196     $ 2,443  
Non-GAAP operating margin                     8.5    %    4.6    %
                                                          
                                                          
Interactive Intelligence Group, Inc.
Reconciliation of Supplemental Financial Information
(in thousands, except per share amounts)
(unaudited)
                                             
                                            Three Months Ended
                                             March 31,
                                             2013         2012
Net income, as reported                      $ 1,457     $ 189    
Purchase accounting adjustments:
Increase to revenues:
          Recurring                            85           130
Reduction of operating expenses:
          Customer Relationships               418          256
          Technology                           49           35
          Non-compete agreements               45           45
          Acquisition Costs                   14         122    
          Total                               611        588    
Non-cash stock-based compensation expense:
          Cost of recurring revenues           166          122
          Cost of services revenues            48           34
          Sales and marketing                  807          533
          Research and development             616          397
          General and administrative          533        493    
          Total                               2,170      1,579  
Non-GAAP income tax expense adjustment        (640   )    (501   )
Non-GAAP net income                          $ 3,598     $ 1,855  
                                                          
Diluted EPS, as reported                     $ 0.07       $ 0.01
Purchase accounting adjustments                0.03         0.03
Non-cash stock-based compensation expense      0.10         0.08
Non-GAAP income tax expense adjustment        (0.03  )    (0.03  )
Non-GAAP diluted EPS                         $ 0.17      $ 0.09   
                                                                   

Interactive Intelligence Group, Inc.
Condensed Consolidated Balance Sheets
(in thousands)
                                                       
                                                            
                                              March 31,     December 31,
                                              2013          2012
Assets                                        (unaudited)
Current assets:
  Cash and cash equivalents                   $ 41,793      $  45,057
  Short-term investments                        26,940         23,816
  Accounts receivable, net                      79,211         68,409
  Deferred tax assets, net                      17,031         16,600
  Prepaid expenses                              21,319         15,565
  Other current assets                         6,523        5,958   
         Total current assets                   192,817        175,405
Long-term investments                           13,143         11,757
Property and equipment, net                     27,867         26,816
Goodwill                                        38,244         38,723
Intangible assets, net                          21,890         22,676
Other assets, net                              5,868        6,419   
Total assets                                  $ 299,829    $  281,796 
                                                            
Liabilities and Shareholders' Equity
Current liabilities:
  Accounts payable                            $ 7,693       $  8,796
  Accrued liabilities                           18,470         23,008
  Accrued compensation and related expenses     9,893          13,640
  Deferred product revenues                     12,831         5,999
  Deferred services revenues                   72,013       67,893  
         Total current liabilities              120,900        119,336
Long-term deferred revenues                     25,331         18,000
Other long-term liabilities                    216          343     
Total liabilities                              146,447      137,679 
                                                            
Shareholders' equity:
  Preferred stock                               -              -
  Common stock                                  198            194
  Additional paid-in-capital                    141,090        133,359
  Accumulated other comprehensive loss          (602    )      (675    )
  Retained earnings                            12,696       11,239  
         Total shareholders' equity            153,382      144,117 
Total liabilities and shareholders' equity    $ 299,829    $  281,796 
                                                                       

Interactive Intelligence Group, Inc.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
                                                              
                                                     Three Months Ended
                                                     March 31,
                                                     2013          2012
                                                                   
Operating activities:
Net income                                           $ 1,457       $ 189
Adjustments to reconcile net income to net cash
    provided by (used in) operating activities:
    Depreciation                                       2,608         2,150
    Amortization                                       482           371
    Other non-cash items                               708           (470    )
    Stock-based compensation expense                   2,170         1,579
    Tax benefits from stock-based payment              (363    )     (70     )
    arrangements
    Deferred income tax                                (1,553  )     (163    )
    Amortization (accretion) of investment premium     (270    )     112
    (discount)
    Loss on disposal of fixed assets                   -             25
    Changes in operating assets and liabilities:
             Accounts receivable                       (10,802 )     5,771
             Prepaid expenses                          (5,754  )     (394    )
             Other current assets                      (565    )     (154    )
             Other assets                              1,685         158
             Accounts payable                          (768    )     (1,188  )
             Accrued liabilities                       (4,562  )     (1,785  )
             Accrued compensation and related          (3,747  )     (2,835  )
             expenses
             Deferred product revenues                 6,839         518
             Deferred services revenues               11,444      605     
Net cash provided by (used in) operating              (991    )    4,419   
activities
                                                                   
Investing activities:
Sales of available-for-sale investments                8,911         21,908
Purchases of available-for-sale investments            (13,200 )     (21,300 )
Purchases of property and equipment                    (3,569  )     (2,569  )
Acquisitions, net of cash                              -             (7,042  )
Unrealized loss on investment                         17          -       
Net cash used in investing activities                 (7,841  )    (9,003  )
                                                                   
Financing activities:
Proceeds from stock options exercised                  5,704         1,777
Proceeds from issuance of common stock                 400           141
Employee taxes withheld for restricted stock units     (899    )     (253    )
Tax benefits from stock-based payment arrangements    363         70      
Net cash provided by financing activities             5,568       1,735   
Net decrease in cash and cash equivalents              (3,264  )     (2,849  )
Cash and cash equivalents, beginning of period        45,057      28,465  
Cash and cash equivalents, end of period             $ 41,793     $ 25,616  
                                                                   
Cash paid during the period for:
Interest                                             $ 4           $ -
Income taxes                                           6,764         2,094
                                                                   
Other non-cash item:
Purchases of property and equipment payable at end     20            234
of period
                                                                             

Supplemental Data
(Dollars in thousands)
(unaudited)
                                                                 
                 2012                                                     2013
                 Q1        Q2         Q3        Q4         Total      Q1
                                                                          
Margins
(GAAP):
   Product         70.9 %     69.5  %     73.4 %     75.2  %     72.5 %     71.9  %
   Recurring       73.8 %     72.4  %     72.3 %     72.7  %     72.8 %     70.0  %
   Services        19.7 %     22.6  %     18.9 %     33.5  %     24.8 %     31.2  %
   Overall         66.8 %     65.2  %     65.6 %     67.9  %     66.5 %     64.6  %
                                                                          
Year-over-year
Revenue Growth
(GAAP):
   Product         -4.8 %     -18.8 %     3.3  %     2.5   %     -4.5 %     44.0  %
   Recurring       31.1 %     27.2  %     17.9 %     31.5  %     26.8 %     22.4  %
   Services        -8.4 %     23.5  %     34.7 %     71.7  %     30.0 %     100.6 %
   Overall         10.6 %     5.4   %     13.7 %     22.3  %     13.3 %     38.8  %
                                                                          
Orders:
   Over $1         6          8           9          19          42         8
   million
   Between
   $250,000        11         28          28         49          116        31
   and $1
   million
                                                                          
Number of new      60         67          65         110         302        74
customers
                                                                          
Average new
customer
order:
   Overall       $ 240      $ 349       $ 409      $ 623       $ 440      $ 335
   Cloud-based     761        557         822        1,134       866        788

ININ-G

Contact:

Interactive Intelligence
Stephen R. Head, Chief Financial Officer, +1-317-715-8412
steve.head@inin.com
OR
ICR, Inc.
Seth Potter, Investor Relations, +1-646-277-1230
seth.potter@icrinc.com
OR
Interactive Intelligence
Christine Holley, Senior Director of Market Communications, +1-317-715-8220
christine.holley@inin.com
 
Press spacebar to pause and continue. Press esc to stop.